Demonstrating the Value of Mining To MexicoMon, 01/31/2022 - 11:35
Q: How have President López Obrador's policies affected Mexico's mining investments?
A: This administration has presented policies that are contrary to fair and reasonable investment. In sectors such as hydrocarbons and infrastructure, we have seen a trend toward abandonment of public-private partnerships and projects. Their treatment of PEMEX and the cancellation of NAIM are two unfortunate precedents that directly and negatively impact how foreign investors view Mexico. Despite these short term concerns, we remain optimistic for the long term potential of Mexico. We expect the political landscape will continue to shift to the left, and although we believe this administration has been introducing irrational policies, we hope things will move back toward more rational policies over time. However, we have addressed this political volatility and higher risk by expanding our activities in both Chile and the USA.
Q: What compelling arguments advocate in favor of the role of mining in Mexico’s economy?
A: The best thing that any government can do is create positive conditions conducive for new investments and economic activity. Mexico’s mining industry is focused on generating economic activity in remote, rural and impoverished areas because that is where the mines are located. We work in places where there is scarcity of employment, education, health resources and public infrastructure. At every significant mining project in Mexico, companies invest in the development of the communities, in education by developing local and diversified workforces, talents and skills, and in health by facilitating new clinics and medical services. Our industry’s ESG work in the country is exemplary and it sets a standard for all new investors to follow, which is beneficial for both the people and the government.
The freezing of new mining permits and concessions places these beneficial activities at risk. We can exemplify that with our own activities in Mexico. For example, we are in the final permitting and initial construction phases of our next and largest mine, with an initial capital investment of US$175 million that will create economic activity worth over US$1 billion over the coming 10 years. We have to move very carefully at this stage because we are risking a significant amount of our shareholders’ capital in this new project. However, it is a desirable mine for all stakeholders, and we continue to view Mexico as a desirable jurisdiction, so I believe we can weather this current storm. We hope that the government comes to understand that the halting of all new exploration activity prevents the discovery of new orebodies and the development of new mines and therefore cuts the industry off at its knees.
Q: What is the role of ESG in the mining industry?
A: ESG is a core philosophy of every mining company because if we don’t create benefits for all stakeholders, we can’t develop new mines. In an ideal world, Mexico’s government would have a significant presence in the most remote communities in the country and provide all the basic services. The reality is that many of these communities lack much government presence and basic services are nowhere to be found. For example, we have seen communities with no medical infrastructure, meaning not even a clinic or a doctor, no banks, no secondary schools and no paved roads. Companies like ours have had to roll up their sleeves and establish private-public partnerships with local authorities to provide these basic services. Take the example of our Guanacevi project. We have now been working in Guanacevi since 2004. We are the largest employer in the entire municipality, representing around 30 to 40 percent of its GDP. When you visit it now, you can see all of the hallmarks of economic improvement. Infrastructure has been developed and new businesses are flourishing. Our success in this area resulted from our willingness to take a chance on its potential. Modern technology was required to make new discoveries and develop new mines. Since the beginning, we have worked with integrity to create tangible and long lasting benefits for the local community, and take care of the environment.
Q: How does your outlook for gold and silver compare to the growing potential of other metals?
A: We still favour the precious metals although we are happy to produce base metals as byproducts. The precious metals have a key role to play in the global financial system, as a store of value and a hedge against inflation. Given the massive amount of monetary inflation worldwide during the global financial crisis of 2008, and more recently due to the COVID pandemic, gold and silver prices still have a way to go on the upside. However, silver is special in that it is also an industrial metal. Much of the enthusiasm for base metals has to do with the role they play in transitioning to a low carbon global economy, and you cannot have a green economy without silver. Silver is the backbone element of photovoltaic panels for solar power and of all electronic circuitry in electric vehicles.
Having said that, if we were to expand beyond gold and silver, our next preferred metals would be copper, lead and zinc. We do not have any copper, lead or zinc production at this time. The projects that we look at for acquisition remain focused on silver plus anything else we find along that exploration path. Silver does hang out with copper, lead and zinc in nature. In fact, Mexico has many of these kinds of polymetallic mines, and we recently acquired one, the massive La Pitarrilla silver-lead-zinc project in Durango. We plan to develop La Pitarrilla after we complete the construction of our Terronera mine in Jalisco.
Endeavour Silver Corp. is a mid-tier precious metals mining company listed on the NYSE:EXK and TSX:EDR. The company owns two high-grade, underground silver-gold mines and three development projects in Mexico.